chap2 crafting and executing strategy
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Chap2 Crafting and Executing StrategyTRANSCRIPT
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CHAPTER 2CHAPTER 2
CHARTING A COMPANY’S
DIRECTION: ITS VISION,
MISSION, OBJECTIVES, AND STRATEGY
CHARTING A COMPANY’S
DIRECTION: ITS VISION,
MISSION, OBJECTIVES, AND STRATEGYSTUDENT VERSION
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WHAT DOES THE STRATEGY-MAKING,STRATEGY-EXECUTING PROCESS ENTAIL?
1. Developing a strategic vision, a mission statement,
and a set of core values.
2. Setting objectives for measuring the firm's
performance and tracking its progress.
3. Crafting a strategy to move the firm along its
strategic course and to achieve its objectives.
4. Executing the chosen strategy efficiently and
effectively.
5. Monitoring developments, evaluating performance,and initiating corrective adjustments.
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TASK 1: DEVELOPING A STRATEGIC VISION,A MISSION STATEMENT, AND A SET OF
CORE VALUES
Developing a Strategic Vision:
● Delineates management’s future aspirations
for the firm to its stakeholders.
● Provides direction—“where we are going.”
● Sets out the compelling rationale
(strategic soundness) for the firm’s direction.
● Uses distinctive and specific language to set
the firm apart from its rivals.
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COMMUNICATINGTHE STRATEGIC VISION
Why Communicate the Vision:
● Fosters employee commitment to the firm’s chosen
strategic direction.
● Ensures understanding of its importance.● Motivates, informs, and inspires internal and external
stakeholders.
● Demonstrates top management support for the firm’s
future strategic direction and competitive efforts.
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WHY A SOUND, WELL-COMMUNICATEDSTRATEGIC VISION MATTERS
It crystallizes senior executives’ own views aboutthe firm’s long-term direction.
It reduces the risk of rudderless decision making.
It is a tool for winning the support of organization
members to help make the vision a reality It provides a beacon for lower-level managers in
setting departmental objectives and crafting
departmental strategies that are in sync with the
firm’s overall strategy.
It helps an organization prepare for the future.
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DEVELOPING A COMPANYMISSION STATEMENT
The Mission Statement:
● Uses specific language to give the firm its own unique
identity.
● Describes the firm’s current business and purpose—
“who we are, what we do, and why we are here.”● Should focus on describing the firm’s business, not
on “making a profit”—earning a profit is an objective
not a mission.
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LINKING THE VISION AND MISSIONWITH CORE VALUES
Core Values
● Are the beliefs, traits, and behavioral norms that
employees are expected to display in conducting the
firm’s business and in pursuing its strategic vision
and mission.
● Become an integral part of the firm’s culture and what
makes it tick when strongly espoused and supported
by top management.
● Matched with the firm’s vision, mission, and strategycontribute to the firm’s business success.
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TASK 2: SETTING OBJECTIVES
The Purposes of Setting Objectives:
● To convert the vision and mission into specific,
measurable, timely performance targets.
● To focus efforts and align actions throughout
the organization.● To serve as yardsticks for tracking a firm’s
performance and progress.
● To provide motivation and inspire
employees to greater levels of effort.
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THE IMPERATIVE OF SETTINGSTRETCH OBJECTIVES
Setting stretch objectives promotes better
overall performance because stretch targets:
● Push a firm to be more inventive.
● Increase the urgency for improving financialperformance and competitive position.
● Cause the firm to be more intentional and
focused in its actions.
● Act to prevent internal inertia and contentment with
modest to average gains in performance.
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♦ Financial Objectives
● Communicate top
management’s goals for
financial performance.
● Are focused internallyon the firm’s operations
and activities.
♦ Strategic Objectives
● Are the firm's goals
related to marketing
standing and
competitive position.● Are focused externally
on competition vis-à-
vis the firm’s rivals.
WHAT KINDS OF OBJECTIVESTO SET
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THE NEED FOR SHORT-TERM ANDLONG-TERM OBJECTIVES
Short-Term Objectives:
● Focus attention on quarterly and annual performance
improvements to satisfy near-term shareholder
expectations.
Long-Term Objectives:
● Force consideration of what to do now to achieve
optimal long-term performance.
● Stand as a barrier to an undue focus on short-term
results.
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THE NEED FOR A BALANCEDAPPROACH TO OBJECTIVE SETTING
A balanced scorecard measures
a firm’s optimal performance by:
Placing a balanced emphasis on achieving
both financial and strategic objectives.
Tracking both measures of financial performance
and measures of whether a firm is strengthening
its competitiveness and market position.
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SETTING OBJECTIVES FOR EVERYORGANIZATIONAL LEVEL
Breaks down performance targets for each
of the organization’s separate units.
Fosters setting performance targets that
support achievement of firm-wide strategicand financial objectives.
Extends the top-down objective-setting
process to all organizational levels.
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TASK 3: CRAFTING A STRATEGY
Strategy Making:● Addresses a series of strategic how’s.
● Requires choosing among strategic alternatives.
● Promotes actions to do things differently from
competitors rather than running with the herd.
● Is a collaborative team effort that involves managers
in various positions at all organizational levels.
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TASK 4: EXECUTING THE STRATEGY
Converting strategic plans into actions requires:● Directing organizational action.
● Motivating people.
● Building and strengthening the firm’s competencies
and competitive capabilities.
● Creating and nurturing a strategy-supportive work
climate.
● Meeting or beating performance targets.
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TASK 5: EVALUATING PERFORMANCEAND INITIATING CORRECTIVE
AJUSTMENTS Evaluating Performance:
● Deciding whether the enterprise is passing the three
tests of a winning strategy—good fit, competitive
advantage, strong performance.
Initiating Corrective Adjustments:
● Deciding whether to continue or change the firm’s
vision and mission, objectives, strategy, and/or
strategy execution methods.
● Based on organizational learning.
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